On Thursday, BofA Securities made a significant revision to its stance on Info Edge India Ltd. (INFOE:IN), upgrading the stock from Underperform to Buy and substantially raising the price target to INR9,000.00, up from the previous INR5,185.00. The adjustment reflects a positive outlook on the company's market position and revenue recovery prospects.
The analyst at BofA Securities highlighted the strong market share of Info Edge's Naukri portal, which commands about 70% of the traffic in the Indian jobs market and has maintained a dominant position for over two decades. The firm does not anticipate any major disruption risks in the foreseeable future, acknowledging the network effect that has enabled the company to sustain high margins exceeding 50%.
Info Edge's business, particularly the Naukri portal, is observed to be on a path to recovery after a cyclical slowdown in the past 12-18 months resulted in year-over-year revenue declines. The analyst cites commentary from IT companies and recent industry checks, projecting a steady revival in revenues, aided by a gradual increase in IT hiring. Additionally, there is an expectation of business diversification, which could further enhance revenue streams and margins.
Moreover, the analyst noted the impressive performance of Info Edge's investments in Zomato and PB Fintech, which have seen their stock prices surge by 165% and 138%, respectively, in the last 12 months, outpacing the Nifty's 26% increase. These investments, which contribute to 33% of the firm's Sum of the Parts (SOTP) valuation—even after accounting for a holding company discount—are expected to continue their positive business momentum.
Finally, the BofA Securities analyst anticipates that the mark-to-market impact of Info Edge's investments in Zomato and PB Fintech will have a favorable influence on the company's stock price, reinforcing the upgraded outlook and enhanced price target.
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